{ "episodeId": "SLP602", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "pierre_rochard": { "name": "Pierre Rochard", "role": "guest", "tag": "PIERRE" } }, "segments": [ { "speaker": "stephan", "time": "00:00", "start": 0.1, "text": "The product market fit for long term savings with Bitcoin is actually going to increase, not decrease." }, { "speaker": "pierre_rochard", "time": "00:19", "start": 18.61, "text": "Hi everyone, and welcome back to Stephan Livera podcast, brought to you by Bold, the best place to buy and save Bitcoin. Listeners in the US, you can check it out at getbold dot io. Rejoining me today is my friend Pierre Rochard. Pierre Rochard. He's currently VP of Research over at Riot, but a long time, you know, commentator and, been in the space a while, worked at different companies and, yeah, has lots of insight to share, particularly on, Bitcoin mining nowadays. Wanted to start with, just kind of your updated thoughts on where things are with savings technology. I know this is something you've been, promoting for a long time. Where do you see that at these days?" }, { "speaker": "stephan", "time": "00:58", "start": 57.92, "text": "Yeah, so, I think that it's the product Part of Bitcoin that really has product market fit, and, it's, it's-- I've been thinking about different ways of measuring that. so I actually took a, I took the Bitcoin Core, node, you know, that's written in, in C++, the, the inheritor of Satoshi's, you know, code base essentially. and I plugged it into a SQL database, so I've got it, writing out all the data into a SQL database database for me to query because, I am a, I'm a Bitcoin maximalist, but from a database perspective, I'm a SQL maximalist, in particular, Postgres. and so what, the, the metric that I came upon, and thought of really last week was looking at the whole UTXO set, which is Bitcoin's balance sheet. It's the, that snapshot of user balances, although really address balances, right? At a particular point in time, and looking at, so past analyses, myself and I've seen lots of others do this as well, is looking at how many, UTXOs are older than one year. basically having that be the metric of long-term savings, right? that these coins have not moved. now people will come back with lots of, technical, You know, limitations of this measure, namely that if you move your coins from one cold storage wallet to another cold storage wallet, this metric would make it look like you essentially spent your coins and that, you know, the, the long-term savings has been undone, when in fact, from the perspective of yourself, your, your, your economic entity, from an accounting perspective, it's still long-term savings. And so it's not a perfect measure, I'd say it's a- A proxy measure. And, what, what, what I thought of was, okay, so we're looking at it, holding the one year constant, but, and then saying, okay, seventy-five percent of the Bitcoin have not moved in more than a year. and, you know, during the bull markets, we see that metric go down, that people pull coins out of their hodl, and go and, and, to essentially rebalance their portfolio generally, right? That, they want To either put their kids or their nephews or nieces through college, pay off their parents' mortgage, contribute to charity, buy stocks and bonds, which we can have a whole conversation about the wisdom of rebalancing in that direction, or buy a Lambo, right, famously, or, or a pizza. So we see it go down in, in bull markets and then, in bear markets or kind of in sideways markets like what we have today, it tends to drift up, because people, have accumulated coins in the past and they're just sitting on them, and so, as time goes by, those coins transfer into the long-term savings category. and so the percentage of coins older than a year changes. But what I was thinking was, okay, well, what if we- Hold the percentage constant. So let's look at the median Bitcoin that is, UTXO by value, not by count. I'll get into why count doesn't work. but the-- by value, so the-- that's essentially, let's say there's nineteen million Bitcoin out there, so the nine and a half millionth Bitcoin, how old is it, if we rank order them by age? And, that's the- So I put together kind of a, a chart over the past, several years, and we'll, we'll share it with your audience. But basically, you know, obviously it starts at zero, because, that's, that's, that's where we all started at zero. and it gradually went up over the past, let's call it a decade plus, right? Fifteen years essentially, to where now it's based-- it's two and a half years. So the median Bitcoin has been held for two and a half years In cold storage and hasn't moved. now, what I like about this measure is that it doesn't-- it's not affected by, you know, people might point to limitations of, okay, look, Satoshi, he hasn't moved his Bitcoin, he might not have access to his Bitcoin. There's lots of Bitcoin where the private keys might have been destroyed, and so the people don't have access to them. and I don't think that that describes the median Bitcoin. so I don't think that we've lost nine and a half million Bitcoin. so the median Bitcoin isn't affected by outliers either in that direction or in the other direction of kind of the high velocity, trading transactional economy." }, { "speaker": "pierre_rochard", "time": "06:07", "start": 367.17, "text": "Yeah." }, { "speaker": "stephan", "time": "06:09", "start": 368.95, "text": "And it's, you know, it's not a steady up and to the right. So just like with the previous measure, we do see that, for example, in two thousand and seventeen, the median age of a Bitcoin went from almost two years, crashing down to less than one year. it was basically like eight months. Yeah. and then the-- Although I would say" }, { "speaker": "pierre_rochard", "time": "06:31", "start": 391.16, "text": "could that also be because of SegWit and a lot of people moving, you know, from the old type of address, you know, that kind of thing?" }, { "speaker": "stephan", "time": "06:39", "start": 398.64, "text": "Perhaps moving from output types right there. I could add that to the analysis, because I do have data on, SegWit adoption. But, my understanding is most SegWit adoption happened in two thousand and twenty, when Blockchain dot com added it. now that's by count, I'd have to look at it by value. I haven't looked at SegWit by value. You bring up a really interesting point. This is why I love coming onto the Stephan Livera podcast. It makes you think harder, gets you out of your comfort zone The, and, and then we, after 2017, we have a steady march up, to where now we're over, two years old for the median UTXO. And my hypothesis is that this is going to continue this trend, and that the median UTXO is going to continue to get older. and, you know, obviously there will be pullbacks when we get a raging bull market and, you know, people are selling, but- less and less so. So, there's, is-- so on, on the high velocity part, you know, if we go into Lightning, I think it's really interesting to look at the age of Lightning channels. so now that we've got quite a few years under our belt, there's Lightning channels, I, I was looking at Kraken's node, since I was, ha-ha, had a part in, in getting that stood up. there's channels still open from the beginning of Kraken's node, like and so the, age of Bitcoin isn't necessarily going to indicate the monetary velocity of Bitcoin because, those channels could be open for a very long time, but then the payments within those channels could be, you know, recycling those Bitcoin over and over and over, and you don't see that in the on-chain footprint. The other really important factor, I think, is the improvements in cold storage Storage technology. So hardware wallets continue to get better and better. we have, as, as your listeners well know, we have tremendous improvements on multisig that are coming with, the ability to use Taproot, to have a multisig that has a lot more, participants in the quorum, and also a much more efficient footprint on chain. So, you know, the, the adoption of multisig and, and hardware wallets will make it such that these coins, they're, they, it'll, it'll lessen the risk of having coins in long-term cold storage, right? You, you won't feel as strong of a need of, okay, I should move my coins because my paper wallet from two thousand eleven could have JavaScript that's compromised, right? So, that was actually something that, was in the news, feels like recently, but I think that was like more than a year ago. so- all that to say that I think that the product market fit for long-term savings with Bitcoin is actually going to increase, not decrease. And so, you know, if, if you're a builder out there thinking about what's going to get adoption and what should I be, building on, I think the, the long-term savings aspect of Bitcoin, i-is one to, really lean into. I, I don't wanna take away from the transactional- You know, payments use cases, because I, I, I'm a big believer in those, and I think that, adoption is going to continue there as well. but maybe it's just, you know, we have to stay balanced, is, is what I'd say. We, s-some people wanna lean into one direction or the other too much, and there's, there's exciting stories on both ends." }, { "speaker": "pierre_rochard", "time": "10:27", "start": 626.8, "text": "Yeah, that's a good point you make there around, you know, we see a lot of battle, sometimes it's online," }, { "speaker": "pierre_rochard", "time": "10:36", "start": 635.52, "text": "versus spending, and they'll be sort of set against each other when in practice, really, like, you know, if you really truly adopt Bitcoin as your money, you're doing both. You're doing both of these things. and to your point about the UTXO median age, of course, the listeners will flash this up on the video, and it'll be in the show notes, but I think an interesting point will also be that In the, you know, Bitcoin economy, if you look at all the UTXOs, there's probably this small group of UTXOs that are regularly cycling around, right? They may be going to and from the exchanges or maybe they are, be-- on some of these swap providers like a Bolts dot Exchange, you know, there's kind of a smaller amount of coins that are regularly, rapidly cycling around, you know, because of people trading and, and, you know, earning coins or selling coins, whatever, spending coins. But then on the other hand, as your analysis This big hodler, you know, group of people and coins. And so I think that, that's really the point you're making, which is that over time it's proving it out. And I think it's also fair to point out that, if you think about the big bull run years in Bitcoin, right? If you look at twenty thirteen, twenty seventeen, late twenty twenty, and early twenty twenty-one, those were the years that you saw this, you know, extreme, price moves up. And you could even arguably say, even earlier this year, right? Where in- And, you know, right now as we record this, it's September 2024, but let's say around February, March of this year, we had very explosive growth, it was maybe twenty-eight K all the way up to like seventy-three K or so. Now, you know, nowadays we're kind of hanging around at, you know, fifty-eight K, fifty-eight ga- fifty-eight K gang shout out there. so I think it's an interesting sort of dynamic there, isn't it, that the-- as you see these explosive upwards moves in the price, you get this kind of rebalancing. So, you know what? I think it would be a good spot to talk about your views on rebalancing because- Let's say if somebody's coming from a, a trad-fi mindset, they might think, \"Look, oh, Bitcoin has just gone, you know, three x or four x. Shouldn't you, rebalance?\" What are your views on rebalancing?" }, { "speaker": "stephan", "time": "12:41", "start": 761.27, "text": "Yeah, I mean, I, I think that, it, it ends up being a personal finance question, and, you know, that's where I turn to my expert wife, Morgan Rochard, who is a, financial planner who understands Bitcoin. they're very rare out there. It comes down to, big questions like what are your goals in life? and it-- these are really values-based questions. it's not about trying to time the market. I think that's the biggest dichotomy is are your decisions being driven by others, i.e. the Bitcoin price, or are they being driven by your free will, by what you want your life to be like, what you want, you know, to, to- accomplish. And so, if, if rebalancing is, you know, to, and, and I think that it's important to get into these subjective questions because people will say, \"Uh, and this is a very libertarian instinct of, hey, look, you know, if you wanna sell all your Bitcoin and, and go buy cocaine and just, you know, go on a bender, like that's, that's your right, that's your freedom. You should, you know, we shouldn't have any judgments about people doing that.\" And my view is Because, we can very easily know what the consequences of that will be, which is that after they're finished, you know, putting all the, the, the snow up their nose, they don't have anything to show for it and they're depressed and miserable and, you know, they're really unhappy that they spent all their Bitcoin on the cocaine. Like, there's not a scenario where that person has achieved their most fulfilled life, they've self actualized and, you know, they're very content with their accomplishments. So we should have, subjective judgments. Now, what I'll add is obviously the Bitcoin network won't stop you from d-selling your Bitcoin, even if it's for, bad ends, right? So it really, it's, it's more at the social level of, hey, let's, let's think about how can we be mindful about how we spend our Bitcoin, how can we do it in a way that is aligned with, human flourishing, that, you know, these are philosophical concepts that have- been explored for millennia, and Bitcoin doesn't change those. What, what Bitcoin does is that it helps with the incentives, where now instead of feeling a need to go out and consume and spend your money right away because inflation is eating away at it, now you actually do have the time to ponder and to reflect and to think about what would be the best way to spend this money, and, and instead of being driven towards materialism. So I think that it changes the incentives and I- Rather subtle way, and at a population level, you know, or we could look at it from a marginal economics perspective, that it does change, people's behavior, and that's, that's a good thing. I think that we can have a value judgment on that." }, { "speaker": "stephan", "time": "15:47", "start": 947.17, "text": "the other part of it too is that, there, you-- people talk about, \"Oh, Bitcoin's privacy is, is broken. You know, it's a transparent chain, you can see, everything going on, on it.\" and then I look at the data. So, you know, to your point about the balance between long-term savings and kind of this high-velocity economy, there's about three hundred billion dollars worth of Bitcoin, being settled on the network every month A week. So three hundred billion a week, so, you know, in a month, you're talking about north of a trillion dollars worth of Bitcoin. And granted, some of those might be to, like, change addresses, right? But I always like to make the point that- Even if the Bitcoin are going to a change address or it's a consolidation or something like that, where, you know, we're not talking about the exchange of Bitcoin for goods and services, my bigger picture point is that somebody accessed their private keys in order to sign that transaction, and that, that's a signal because that means that, three hundred billion dollars worth of private keys were accessed, right? So you-- it's, it's not like a metric where somebody can- Fake the metric, inflate it, risk free, right? By, spamming the network. No, there's-- every time you touch your private keys, there is risk involved, with doing that, and you generally do it for good reason, you don't just do it willy-nilly. and so I think that's an important metric, and people come back and say, \"Okay, well, alright, three hundred billion dollars, what are they doing? Where, where are those Bitcoin going? You know, like some of them are consolidations, sure, we can kind" }, { "speaker": "stephan", "time": "17:31", "start": 1050.88, "text": "and I, I've reached out to some of the, companies that track on-chain, criminal activity, and I'm like, \"Hey, do you guys have, you know, they say that, okay, only one percent of it is for criminal activity. What's the other ninety-nine percent? What's going on with that?\" I get a blank stare in return. They don't know. And I'm like, \"Wait, I thought Bitcoin had ba—bad privacy. Like, if Bitcoin has bad privacy, couldn't we get some pretty clear answers about...\" Well These Bitcoin went to Walmart, these Bitcoin, you know, were cross border, remittances to El Salvador, these Bitcoin, you know, et cetera, were trading. So, it's, it's interesting that there's still a lot of unaccounted for or unexplained activity, but the, the activity is there. I mean, the, the on-chain data is pretty clear about that. I, I do think though that- to your point, a lot of it is rebalancing, and so, you know, when, when, when the Bitcoin price goes up, mechanically, some people are gonna be selling, and I actually think that when we think about, Bitcoin's price, ultimately the rebalancing is what is the ceiling on Bitcoin's price increases. if there was very little rebalancing, that means that new entrants, right, new buyers of Bitcoin would be competing for- Scraps, and they would be, driving up the price like" }, { "speaker": "pierre_rochard", "time": "18:55", "start": 1134.66, "text": "super high, right? Yeah." }, { "speaker": "stephan", "time": "18:56", "start": 1136.32, "text": "Exactly, and so when, when we look at a parabolic top, what you have is lots of long-term hodlers trying to sell their Bitcoin as quickly as possible because they want to realize that value and, go, go and spend it or, you know, start a small business or whatever their, their life's goals and aspirations are. And I- Actually, I, I think that's good in the sense that the, the utility of savings is twofold. One is the utility while you're saving, which is that you are hedging against uncertainty, you are alleviating the, the, the anxiety that comes with, not having a cushion, right? And so, that's, that's the utility of it while you're holding. this was really well described by, Hans Hermann Hoppe, in an article we can link to as well. the, The" }, { "speaker": "pierre_rochard", "time": "19:51", "start": 1190.8, "text": "yield from money held reconsidered. Thank you, Stephan. So I think he was answering WH Hart. I think it was a speech, but there was an article of it on Mises. I'll put it in the show notes. We've, yeah, a few and I have, mentioned this over the years quite a bit, but gone. Yeah." }, { "speaker": "stephan", "time": "20:03", "start": 1203.22, "text": "It's always worth rementioning, because I, I think that, you know, we, we don't get taught this by the Keynesians in college, right? They, they don't. These, these are Is that then you can spend it. And with Bitcoin in particular, you know, it being, a fixed money supply where you have continued adoption happening, the purchasing power of the Bitcoin is increasing, and then when you go spend it, that means that you're able to spend it, m-m, and have more purchasing power than you had on day zero when you acquired the Bitcoin. and so you're essentially proving out the whole, life cycle thesis of the product market fit of long-term savings. Things, by going and then, you know, five years later, rebalancing and, and spending those Bitcoin. So I don't, I don't have like an ideological animus against people spending their Bitcoin, I think that, that's fine. now, jokingly we might make fun of them, you know, for being lettuce hands, et cetera, but, you know, if you're five years in and you're doing it for the right reasons, I don't think you're lettuce hands. I think you're lettuce hands if you panic buy" }, { "speaker": "pierre_rochard", "time": "21:19", "start": 1278.85, "text": "the This show brought to you by CoinKites dot com, the creators of the best Bitcoin hardware security devices such as the Coldcard Mark IV and the new Coldcard Q. Now, we use Bitcoin hardware security devices to keep our keys offline, our private keys offline. Now, the way these work is you can do that setup, write down your twelve or twenty-four words on the, the seed word cards, and keep that secure. Now, you can use this device to interact with the Bitcoin network using software such as Sparrow Wallet. 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For listeners in the US, Bold lets you secure your financial future with complete peace of mind by integrating a low fee Bitcoin only brokerage with next gen multi sig vaults. With Bald, you can smash buy Bitcoin or set a DCA plan for only zero point nine nine percent fees and seamlessly deposit the Bitcoin direct to your Bald Vault. The Bald Vault is a two or three collaborative multisig where you hold two keys and Bald holds one as a redundant backup protecting against loss or theft. You can use Trezor, Ledger or Coldcard hardware wallets to spin up a Bald Vault in just a few minutes, and the Bald Vault is the only collaborative custody vault available with zero monthly fees. They're also offering zero fees on your first ten thousand dollars Bitcoin buys and twenty five dollars of free Bitcoin when you buy a hundred dollars of Bitcoin or more. Try Bold today and upgrade your stacking experience over at getbold dot io. Yeah, I think that's a great way to put it. I think the way I understood it as well is the way, you know, our friend, Bitstein, might explain it is something like, \"Look, I'm, I'm saving these coins 'cause I want a spaceship someday in the future, you know? You're trying to tell me to spend now, but I'm, I'm saving life, or do you want to be able to pass down a lot of coins, right, to our heirs, to our children, that kind of thing? one other topic that I thought would be interesting is doing business on a Bitcoin standard, because it seems that- Basically, at scale, very, very few businesses have been Bitcoin profitable, right? and that-- now maybe at a smaller scale, maybe if you cherry-pick the time frames, you know, Coinbase or early equity in Kraken, maybe some of the Bitcoin miners who survived, right? To be clear, the ones who survived, not all of them, were Bitcoin positive. Is that just a, you know, is that, I mean, here's the way I'm thinking about it, I'm curious to get your reaction. So the way I'm thinking about that is the world is undergoing hyperbitcoinization right now. We don't know how long this process could take, it could be ten years, twenty years, thirty years, maybe, But because the world is adopting this new money, which we think is the best money, Bitcoin, that it's just incredibly difficult to outperform Bitcoin. If you're running a Bitcoin business and you're trying to earn in Bitcoin, it's just very difficult to do that. Now, maybe that will change post-hyperbitcoinization, you know, maybe, you know, in other words, the cager of Bitcoin, theoretically, we would expect it to sort of taper down over time once we've gotten fuller adoption. So I'm curious How you're seeing that? Are you thinking of it similarly or do you think of it differently in terms of trying to be a profitable business in Bitcoin terms?" }, { "speaker": "stephan", "time": "25:21", "start": 1521.49, "text": "Yeah, absolutely. So, to your point, there's, there's a diminishing marginal returns of Bitcoin, right? Once we reach a hundred percent adoption, all else equal, we, we would just expect it to increase in value based on productivity. now, what I would raise as a question on a hundred percent adoption is, what does that look like from- From the median person's balance sheet, that is that, today you have people who have maybe one percent of their assets in Bitcoin. Now, they've adopted Bitcoin, but do we measure adoption based on how many people have one percent of their balance sheet in Bitcoin? Because if we do that, then we can reach a hundred percent adoption, but the Bitcoin price will continue to increase when they go from one percent to five percent, you know, of their balance sheet, right? So there's, there's that part of it. And then on the other side of capital and goods, right? Capital goods, meaning, you know, businesses, as, as you pointed out, or, or factories, et cetera, that aren't Bitcoin, that are assets that aren't Bitcoin, and the people, presumably, they buy those assets because, they want to earn a return, as you point out, and if Bitcoin's their money, they would want to earn a return that's greater than the return of holding Bitcoin. and- There, there's two parts to that equation. One is what is the, return, on the investment asset, right? So, how, how much, how profitable is it? But the other part of it is how much do you pay to acquire the asset? And I actually think how much you pay to acquire the asset is the critical question in whether you're going to, quote-unquote, outperform Bitcoin or not. and so if you pay, the- The kind of today's price, right, which is basically in this world of, where people are using investment assets as their savings vehicle because they don't have a good money and they don't have the education to know that Bitcoin's, you know, a good money, the current, investment asset prices are too high, relative to what they would be in a Bitcoin economy. and so it, I think that in a fully hyper-Bitcoinized world The cost of buying an investment asset would be so much less in real terms, that, you know, that's, that's where, you would actually do okay, by investing in the asset. Now, I would also add that the, where the returns really are, are in how you operate the asset. and so we're used to the, in this fiat world where you just park your money, quote unquote, in the asset and then the value goes up, due to inflation, and then you pull your money out and, you know, you've done well. even though you, you haven't necessarily operated the asset, you haven't improved it, you haven't, you know, done anything particularly entrepreneurial. and I think that this is, this is really the, the case against the capitalist would be if we think of the capitalist as somebody who's the, the passive investor, right? who's not- Actually providing any kind of innovation, no hustle, no sweat, no blood, no tears, and is just kind of, sitting on the capital appreciation of the asset. well I can understand why some people are a little bit skeptical of, the fact that they've, they've done well just because the Federal Reserve has lowered interest rates from twenty percent to zero percent over the past several decades, right? and contrast that with somebody who- Could be, for example, they could be acquiring a company, in order for-- to get the utility of the equity, the utility being the voting rights to influence the operations and kind of the, the governance or whatever it is of, of the entity of, of the asset. And so I think that in a hyperbitcoinized world, the only reason you would dabble in equity markets would be because you are an operator and you are acquiring- The utility of the equity, not, that you think that you, you're gonna be a passive investor and do well just by sitting on the sidelines, you know, being a cheerleader, or, you know, just checking your, your brokerage account every month, and, and seeing number go up. So I, I think that's the biggest, difference. Now, it's particularly difficult to look for, for example, like business ideas in the Bitcoin space itself, because Bitcoin being open source Of course, the whole model, right? If we read the Bitcoin white paper, it's about, \"Oh, let's disintermediate, let's not have financial intermediaries, let's not have middlemen.\" And historically, you know, that's been a source of a lot of businesses, and I think that in a well-functioning economy, there's nothing wrong with middlemen, you know, like the, the, the supermarket that buys from farmers and then sells to, retail, consumers. There's nothing wrong with that, that middleman aspect of it and I think that a lot of Bitcoiners are like, \"Oh, you know, we gotta decentralize, we gotta have like, direct farm to, you know, consumer.\" but I, I'd argue that's only because the incentives of the supermarket have gotten such that, you know, because of inflation, you've got this shrinkflation, you have this decrease in quality at the supermarket, and now you have to try to bypass them, and that's just a, byproduct of the fiat world that we live in. That's not-- in, in We have the opposite, where the supermarket is actually, performing the function of really forcing farmers to produce high quality goods, and negotiating with farmers to get the high quality, highest quality goods, to stock their supermarket shelves so that the consumer doesn't have to, constantly be haggling and bartering with, a thousand different farms to get, you know, what, what they want. So, there's definitely a role for intermediaries. The challenge Challenge in, open source world is that, a- and a kind of a world of software, is that we have this trend towards fewer and fewer intermediaries, in, in particular in Bitcoin, and in a monetary system where historically there have been a tremendous amount of intermedia-intermediaries in the monetary system and the payment system. So I think though that, y-you, let's tie it back to Lightning, because, you know, I saw somebody tweet that, oh, you know, there's There can only be like five million people on Lightning, based on the block size limit. And I'm thinking to myself, well, there's like- Realistically, there's like thousands of banks. And so if we had millions of lightning banks, quote unquote, you know, custodial lightning wallet providers, account providers, that, that creates a far more competitive industry, a far more, frankly, decentralized industry. And I understand that, you know, it's not fully disintermediated. You don't have every single individual owning their UTXO and UTXO set. but, in terms of getting to a better world world than we currently are in today, that's a huge improvement, and that you have the ability to opt out, that you can be your own bank if you want to, right? and if you have the means to, to, to buy your way into the UTXO space, which- Right now, it's like you, you paid less than a dollar to get your spot in the TTXO set. So, I think that in terms of the status quo, we're, we're doing pretty well right now. okay, that was long and meandering, but, but let's get back to" }, { "speaker": "pierre_rochard", "time": "33:22", "start": 2002.22, "text": "the, I mean, as you mentioned around businesses and, let's say, fiat multiples, right? As an example today, a typical small business And look, the numbers will vary depending on the industry and so on, but I would say a typical small business might sell for something like three x earnings, something like that, and then maybe as you get larger, maybe you might start to get more like, okay, five x or eight x earnings, and then once you get to like SaaS or these kind of large public company multiples, now you might be like twenty x or something like that. And so You know, some of your commentary earlier made me think about this too, because passive indexing, right? That's a big thing today, right? People are all about not just Bitcoin ETFs, but standard stock ETFs, right? That's like a big normy investment. Just buy the stock ETF, and even without knowing it, there'll be a lot of people who, without knowing it, their super fund or their retirement accounts are doing that too, right? So without knowing it, they already are doing this passive investment, right? So they're complaining about BlackRock and Vanguard and whatever, but it Going into BlackRock and Vanguard. So, but I'm curious, do you think in a Bitcoin standard post-hyperbitcoinization, that there's still a role for passive index equity investing, or do you think it's more like, no, just hold Bitcoin and only hold equity in companies that you're, let's say, more active in, or you have some special expertise or knowledge in, rather than just kind of blindly buying the index like people do now?" }, { "speaker": "stephan", "time": "34:52", "start": 2092.02, "text": "Yeah, that's an interesting question. I, I, I guess I think- I think that, if, if everyone was perfectly rational, then it would be the latter, the, you know, it's only active investors. I do think that there are some folks out there who have, almost ideological attachment to this idea of owning a productive asset, and also they don't wanna be the ones, managing it. And so then, you know, they, they're going to find active managers, to, essentially invest in them. And, you know, the, the other- Part of it too is that you might look at, for example, you might have somebody who's a child prodigy, you know, like, Warren Buffett, you know, they're, they're coming out of school, they, they have a limited amount of capital because they haven't, you know, spent decades saving up in Bitcoin, and then you have this large hodler who's like, \"Oh, okay, well, I'll capitalize your active management, and, you know, part of the motivation might be to, Outperform Bitcoin, but part of the motivation might also be to, you know, see this person succeed, right? Like that, that is as valid of a motivation because that large hodler, they might not even care about outperforming Bitcoin because, you know, they're, they're good, they, they don't need to outperform Bitcoin, they, they've got the life that they want. but what they wanna see is human flourishing. they might even, want to see, for example, new technologies. So they might invest their Bitcoin Bitcoin in a VC because, not because they're trying to outperform Bitcoin, but because they want a robot servant that's going to, tie their shoes. You know, it's like, and they, they don't want to go through the process of finding a hundred entrepreneurs and giving each one a little bit of capital, to see which one pans out. They wanna outsource that to a VC, and so they go find a robotics VC who's going to go do all that work for them. So I do think that there's definitely- roles for passive investment where the primary motivation, again, is the utility that they get out of the passive investment, it's not the outperforming Bitcoin part. and I think that's, that's maybe a bit of a nuance, but I think it's an important one." }, { "speaker": "pierre_rochard", "time": "37:12", "start": 2231.85, "text": "I see. So I guess with the, let's call it the venture capital or the, you want something to exist, exa-part aside, you think for the most part people will just hold a little Bitcoin, that, that they, they, they won't be as much of a culture now as of buying passive index ETF investing, that kind of thing?" }, { "speaker": "stephan", "time": "37:29", "start": 2248.66, "text": "That's correct. and it's because of the fundamentals of Bitcoin, right? That you can't do a multi-sig with your passive investment. you can't, you, you, you can't run a node, right? You can't audit the, their financials in real time. you have to trust them. And so if you're going to go through the trouble of trusting them, it really, I don't think it would ever make sense unless there is some other motivation, that's related Related to, okay, well, I wanna manifest something in the world." }, { "speaker": "pierre_rochard", "time": "38:03", "start": 2282.73, "text": "Yeah. Yeah, and I think it just, it's gonna create a really, you know, for now, it's kind of, there's maybe a bit of a dilemma because you might want to invest and make money, i-as in, in Bitcoin terms, but it's just so difficult pre-hyperbitcoinization to actually achieve that. And I know there are people trying that. I know, you know, there are various funds and things like that who are denominated in Bitcoin Bitcoin and trying to outperform in Bitcoin. Now maybe some of them have like advanced, you know, trading and arbitrage strategies and maybe others actually intend to invest in businesses, and ideally be Bitcoin positive, but to me it seems like it's gonna be a really hard challenge" }, { "speaker": "stephan", "time": "38:44", "start": 2324.4, "text": "A- absolutely. And a hard challenge to me is like the, the, the other side of that coin is hard work, right? Any, you know, h-hard work and intelligence can overcome a hard challenge. And so I think that i-i-that's what it comes down to is that like, yeah, there's not an easy way to outperform Bitcoin. All the ways of outperforming Bitcoin involve hard work. it reminds me of, of this-- there's this meme of, the, the kids opening the book and it's like, \"How to Make Money.\" And then he opens the work, just says, \"It's just work.\" Says" }, { "speaker": "pierre_rochard", "time": "39:16", "start": 2356.12, "text": "work," }, { "speaker": "stephan", "time": "39:16", "start": 2356.48, "text": "yeah. And he's like crying 'cause he doesn't" }, { "speaker": "pierre_rochard", "time": "39:19", "start": 2358.67, "text": "wanna do work." }, { "speaker": "stephan", "time": "39:19", "start": 2359.27, "text": "Yeah." }, { "speaker": "pierre_rochard", "time": "39:20", "start": 2360.49, "text": "But I mean, not just hard work, it's also gonna involve risk, you know? Because this is entrepreneurial risk, you know, you're gonna be putting Bitcoin into a business, and you might be a really hard worker, but you might have the-- you might not have product market fit, you might not have the right skills, you might not have the right team, you might get unlucky, you might get outcompeted" }, { "speaker": "stephan", "time": "39:44", "start": 2384.04, "text": "And in many ways, you're competing with the money printer, right? You're-- So if you're like, \"Okay, well, I'm, I'm a Bitcoiner, I also work in real estate, so now I'm going to try to find ways to outperform Bitcoin by investing in real estate, you know, I'm only gonna invest in the best deals,\" but guess what? You're getting outbid by somebody who is, printing money through, you know, a commercial bank loan, right? And at, low interest rates. So there's a" }, { "speaker": "stephan", "time": "40:14", "start": 2413.88, "text": "You should be investing in real estate, as if Bitcoin didn't exist, and, you know, that's, that's the only way to actually compete in that market, and that's just the brutal reality of it. and then if you want to grow your huddle, what you should do is rather than invest in capital, you should invest time, right? So you'd go to the real estate developer, who's this fiat guy, and you tell him, \"Hey, look, I, I'm really good at real estate.\" Okay, let me trade my time for your fiat, and then you go and buy Bitcoin with your fiat, right? Like it's not, a super complicated equation. You're fiat mining, right? It's, it's this arbitrage of, okay, well, the fiat world doesn't know about Bitcoin. the only scarce asset that they care about is my time, so I'm gonna go trade my time, for fiat that I can buy Bitcoin with. And that's just like, okay, that's-- That is what it is. I, it, it's Desire to be like, well, I wanna, I wanna invest my Bitcoin, I don't wanna invest my time. That's, you know, play stupid games, win stupid prizes, in, in my view." }, { "speaker": "pierre_rochard", "time": "41:23", "start": 2483.0, "text": "Of course, yeah. I think it comes down to as a question of scale as well, because it might be, I mean, if you think about a typical person with a, you know, with a fiat job, they might actually earn more than they s-spend. I mean, that's a good personal finance habit, right? Earn more than you spend, stack that difference" }, { "speaker": "pierre_rochard", "time": "41:44", "start": 2503.94, "text": "At a business level, that's where, you know, larger investments are acquired and there's now a lot more risk." }, { "speaker": "stephan", "time": "41:51", "start": 2510.76, "text": "Well, yeah, and no, because for-- there's, there's, there's businesses that don't require a lot of capital. And so services businesses, you know, like for example, a professional services company like an accounting firm, for example, they just don't have big capital investments. And so it really is about human time, and the investment is in humans, human capital. and the, you know, that's, that, that's a totally fine, thing to, to, now eventually you do build up some equity in that business, and maybe it makes sense to sell that equity to somebody else who doesn't value Bitcoin, and then now you can go and take the equity of your business, you can, you can dump your business bag" }, { "speaker": "pierre_rochard", "time": "42:36", "start": 2556.03, "text": "and flip it into Bitcoin, and yeah, but I guess again, that's always the challenge because we're not trying to time the market, but effectively that- People are gonna, people are gonna get into this kind of situation, right? Now, maybe not now, but later in the cycle, right? What typically happens is you might get people who are like, \"Oh, hey man, I'm about to sell my house, should I just put it all into Bitcoin?\", right? And then you're kind of like, \"Well, none of us knows what's gonna happen to the price. It could drop seventy percent from here, right? It's had eighty percent drawdowns before, multiple of them, so you should be wary.\" So, you know, not trying to time the, time the market or anything, but there are gonna be, there, there are gonna be some hard, decisions for people to hold, right? You might have spent this time building up this equity in a business and realize, oh, wait, I'm still not gonna outperform Bitcoin, and I would have technically been better off selling that business to buy Bitcoin and just hodling that because Bitcoin is doing whatever fifty percent a year or something like that." }, { "speaker": "stephan", "time": "43:32", "start": 2611.53, "text": "And then it, it comes down back to, to the utility of holding the equity, which is that, do you want a third party telling you how to run your business? 'Cause if you sell the equity, you're gonna have somebody telling you what to do. And so maybe you'd experience tremendous disutility from that happening. and so it just makes sense to keep that equity locked up and then to take the free cash flow and to reinvest that into Bitcoin, maybe even go to the bank and say, \"Hey, I need a working capital loan for my business.\" Okay? Now To take more cash out of your business and buy more Bitcoin, because you have the bank financing your working capital. And so there's definitely ways of, you know, saving in Bitcoin while keeping ownership of the business, and, you know, you could even go the Michael Saylor route of actually putting Bitcoin on the business's balance sheet, and, you know, selling the equity in a non-dilutive manner. there's, there's lots of, different approaches to that. But you're, i-essentially there's, there's always, the bagholder, right? Which is the fiat guy who doesn't understand Bitcoin, who's willing to lend you the, the fiat, right? Either because they're creating it, like the bank does, or because, you know, they have it saved up and they just, they don't feel comfortable buying Bitcoin for whatever reason. and so that's where I'm like, well, we're still very early. And, some might say, hey, look From, ethics perspective, you should be trying to educate them on why they should be buying Bitcoin rather than taking a loan from them and you buying Bitcoin and you taking advantage of their, the information asymmetry, involved here. And Honestly, like, it's, we're fifteen years into this, you know? Like, th-this person has heard about Bitcoin, if they have misconceptions about it, if they don't understand it, I'm all, you know, they, they're welcome to ask questions, they're, they're welcome to dig into it. All the information's available for free on the internet. I don't really feel like this is an area where there's tremendous moral hazard of, \"Hey, you're taking advantage of this person's ignorance.\" you know, Bitcoin's the most transparent system in This person is being, frankly, they're being stubborn, right? So they're, they're, they're close-minded or they're, they're, or they've been misinformed by a journalist. And that's where I'm like, well, now the, the, the immorality is on the journalist who fed them wrong information about Bitcoin. so let's, let's focus on that part rather than the part of me investing my time to undo their, misinformation." }, { "speaker": "pierre_rochard", "time": "46:13", "start": 2773.44, "text": "Of course. And I think, I, I think it's fair to point out as I've been saying this as well, that when you first get into Bitcoin, you often want to try and save people, and then later over time, you realize you can't save most people. And, you know, of course, be patient and try to help the, help people who are willing to, you know, to learn, but, There's just, an element to which you just can't save them, and so you have to just kind of let people learn when they're ready. And I think, you know, that's why to me it's not, you're not scamming that person, they're just-- maybe they're just not ready yet." }, { "speaker": "stephan", "time": "46:49", "start": 2808.51, "text": "Yeah, and, and keeping the focus on, on the people who are ready, right? And so, and I think your podcast does a great job of this, of educating the people who are open-minded and who are on this journey to learn about Bitcoin, rather than trying to, force people onto a journey, right? Or, it's, it's really, a-- And I, I'd also point out that there are so many people who are interested in Bitcoin and- And are learning about it, that I don't think that, that, that is like the bottleneck in terms of Bitcoin adoption. I think that the middle of the funnel is the bottleneck, of, hey, let's get people good information like you're doing with your podcast, let's, and let's help educate those who are on this journey, and that, that way they can get set up, for example, on a multisig hardware wallet, such that they feel comfortable going from one percent in an ETF, a Bitcoin- An ETF to, you know, two percent on their Coinbase account, to five percent on their River account, and then to ten percent self-custodied on their hardware wallet. You know, like that journey, there's, there's no shortage of those people, right? There's, there's an abundance of, of that, and it just makes a lot more sense to, pull on that string rather than to push on a string of somebody who's just like close-minded and they just want fiat investments and they're going to- Do fiat investments and, you know, to, to the benefit of the bitcoiners who are accumulating at a lower price than they otherwise would, if that was not the case." }, { "speaker": "pierre_rochard", "time": "48:27", "start": 2907.01, "text": "Yeah, you make a great point about how early we are and who we should be focusing our efforts on. I'm I'm curious, I think you'll have an interesting view on this. What kind of cultural changes do you think we will see on a Bitcoin standard, right? Like some of us believe that it's gonna be maybe more family oriented, right? Or even like the birth rate thing, right? Elon and people are talking about how the birth rates are collapsing around the world. I mean, that's just one example, but I'm curious if you have any other ideas on how society and culture will shift as we move to a Bitcoin standard." }, { "speaker": "stephan", "time": "49:01", "start": 2940.84, "text": "Yeah, absolutely. So, when, when we look at it from the personal finance perspective, of, okay, you have somebody who's living paycheck to paycheck, because of inflation, they are incentivized to go and spend their paycheck, you know, over that two week period. let's assume that, they're, they're, they're not, investing or whatever. and then they learn about Bitcoin, they get orange pilled, they're listening to Michael Saylor, and they're like, \"Okay, I wanna start saving Bitcoin.\" they've got two paths. They can either increase their income, you know, negotiate with their employer, go out job hunting, you know, go interview, improve their personal skills, invest in their, their human capital, sell their time, as we were talking about. the second is spend less. So, you know, they, they might have been living a modest lifestyle, but they might have still, you know, bought a car that wasn't the least expensive car, right? they, they- They might buy coffee that's not the least expensive way of buying coffee, right? So they'd, instead of buying coffee beans and grinding them up and roasting the, and, and, you know, pouring, doing a pour over, they might have been going to Starbucks, to buy their five dollar latte. There's an endless list of these. In particular, examples of wasting money or opportunities to save more money, would be what some might describe as immoral behaviors, sinful behaviors of, you know, buying alcohol, right? gambling on sports. buy lottery tickets, right? So if, if Bitcoin helps them to spend less on materialistic pursuits of varying degrees of, you know, bad, spend less on that so that they can save more in Bitcoin, I, I think it creates a vacuum in that person's life. And so then that vacuum, I think gets filled with spirituality, right? Because now, instead of- Of, drinking, maybe they spend time, at the extreme example, an AA, right, but in a less extreme example, maybe they find a way to, work on their emotional problems instead of, bottling them up, and they go and they meditate, right? Now, so that gets them down this path of spirituality by reducing the amount of materialism in their life. So if you go down that path, then, I do think that eventually you end up, in a, a society Society that indeed is fundamentally transformed, where it's no longer one of, or it's less of instant gratification, it's less of individualism, frankly, and more of transcendent mindfulness and, you know, thinking about other people, and fixing relationships rather than, breaking them or sabotaging them. and less on self-indulgent, kind of, hedonism of drugs, alcohol Alcohol, et cetera, gambling, you know, whether it's gambling of sports or gambling on the stock market, et cetera, and more time spent, improving oneself, and of course, in prayer and, building a family, you know, and, the, the, self-sacrifice, et cetera. So I, I think that's what Bitcoin-- that's how Bitcoin incentivizes a, macro improvement in society, From, from that perspective. And, you know, I think that's-- that, that gets twisted into a controversy on Twitter of like, \"Oh, well, now you're trying to like get people to improve their lives, how dare you?\" and, you know, we should, we should celebrate, you know, people sabotaging their lives and, that's-- that, I think that's fiat. So, I reject it. and, yeah, I hope that answers your question." }, { "speaker": "pierre_rochard", "time": "53:07", "start": 3187.33, "text": "This show also brought to you by Nomad Capitalist. Nomad Capitalist is a leading provider in terms of offshore tax and lifestyle strategy planning and implementation. They can help you go overseas and legally lower your taxes. As many of you know, I grew up in Australia, but I left. I was sick of it in terms of the taxes and the COVID tyranny and all these other things. And so that's why I left, and now I live in Dubai. But that's not necessarily the place for you. 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So if you have a transaction that you sent at a fee that was too low to get confirmed, now you can fix this at with the mempool accelerator. The way it works, you can go and search your transaction, scroll down, click accelerator, and you don't need an account, you can pay with Lightning, and then it'll show you it's now in the And then after a few minutes, it's confirmed. And so this is a great way to help you out if you are stuck, and this can happen where maybe your wallet doesn't have RBF or CPFP, or it might help you in situations where it's impractical to go and re-sign. So for example, multisig with keys in different locations. And thirdly, even in some Lightning scenarios, perhaps a forced close, you might not be able to use RBF. And so in this case, the mempool accelerator can help you out. So keep it in mind, and you can find out" }, { "speaker": "pierre_rochard", "time": "55:06", "start": 3306.11, "text": "Accelerator. And now, back to the show. Yeah, I mean, a-and the funny thing on Bitcoin social media, sometimes the social media discussions, they end up being a discussion about- You know, people trying to attack each other for various lifestyle choices, whether that's, you know, the carnivore diet or, you know, whether somebody wants to go be a, a feminist or whatever, or someone else who wants to have like, is more family focused, let's say." }, { "speaker": "pierre_rochard", "time": "55:34", "start": 3333.79, "text": "I think- We will see the trend towards thinking about your longer term, as opposed to sort of just doing what feels good in the here and now. And I think that's just gonna be a general trend we will see. You know, again, comes back to an Austrian argument as well around high time preference versus low time preference. I think we will start to see more low time preference behaviors, you know, I think we will start to see governments shift as well, And, it's an interesting point you raise as well around, you know, some people have this big misconception about libertarianism meaning that you should sort of be pro- hedonism or pro-anything goes, when it's like, no, most of us, or depending how you view it, but I think most of us see it more like, no, it's a, it's a specific theory of private property rights and the NAP, but that doesn't mean there's not a role for social judgment or things like that if somebody's making, you know, bad life choices. I guess I guess the, the common confusion is that, oh, you're a libertarian, why aren't you in favor of people just doing all kinds of hedonism and short term behavior?" }, { "speaker": "stephan", "time": "56:43", "start": 3403.41, "text": "Yeah, I, I think that where, where, I, I break with essentially with conservatives is that they do wanna make those behaviors illegal. And, to me, it's the reason why you don't want those behaviors to be illegal is first of all, you know, to, to, to- People need to have their free will, so I think that, that's, that's really important, that, but furthermore, you know, free will means that you get to choose between good and evil, and I think that sometimes it gets lost that they're like, \"Oh, well, on the moral relativism side of the equation, they say there is no good and evil, so you have free will and you should just choose whatever you wanna choose, but there's no, we shouldn't be allowed to talk about the truth of...\" And I'm not even saying pass judgment, I'm not even saying to shame someone, I'm saying that just to speak the truth, that, this behavior is good, this behavior is bad, and, you know, you, you might be doing that bad behavior for lots of different reasons. Not here to judge, not here to s-t-tell you, you know, you're a bad person, just here to speak the truth about that behavior, the-- hear, hear the outcomes of that behavior and why, why it's bad. but, you know Well, we should just make that bad illegal, and then that way we can solve it. I think that you, you drive it underground, you, you potentially you make it worse, right? You know, you got this fentanyl epidemic because now you've got all these drugs that are illegal, and so you, you, you don't have-- I, I don't think that's, that's the right path to go down. It doesn't solve the root cause, right? the root cause of the, the behavior of, or essentially of somebody's free will choosing the Truth speaking in society. and that the way, you know, to address it, a much more constructive way to address it is through the incentives, right? And so by fixing the money, right? Fix the money, fix the world. And that's where I'm like, okay, well, it's not so much that I want these behaviors to be illegal, it's that I think that Bitcoin will help reduce the presence of these behaviors, and that we have to be clear that that's a good thing, and that's one of the reasons why- Why we're excited about Bitcoin and that we're, you know, we wanna see more Bitcoin adoption, is to see more good in the world and less bad. and that, it's not the case that we view Bitcoin as, oh, okay, Bitcoin's good because it's censorship resistant, so you can engage in, more behaviors that are evil. And so it's harder for people to stop you from doing bad. I don't think, you know, like that, that is, it, it, it is- It's true that Bitcoin essentially does allow for, it to be easier to do evil in that sense, right, because of its permissionless nature. but we have to zoom out and look, okay, on net, is it going in the good direction or the bad direction? If Bitcoin on net was going in a bad direction, I, I wouldn't be happy about Bitcoin, because frankly, I have kids, like, I wanna wor-- live in a better world. it has to be the case that I think that if we give people more freedom, including the freedom to save money, that, that, the-- because of the fundamental goodness of people, even though, you know, we, we live in a fallen world, and, you know, we, we can get into a theological discussion about, sin and, and the limitations of, of humans, but, you know, we, we also have to talk about the goodness that is in humans, and that if we en- enable people to make decisions about, do I wanna spend my money on- sports gambling because, you know, I think life has no meaning, and if I save dollars, that, you know, my dollars will be worth less anyway, versus, hey, do I wanna buy Bitcoin and be self-sovereign and run my own node, hold my own keys, and be empowered? that the outcome will be, a far less crime, far, you know, less evil in the world. and also it might lower the time preference of criminals themselves. crim-criminality has been analyzed By economists, right? So it's not like, criminality is just purely like, \"Oh, this person's a psychopath and that, you know, they, they're committing this crime.\" It-- there, there are crimes of economic, destitution of, that they, they don't feel like there's any, better way. If we set it up such that, we- Lower the cost of capital, right? We were talking about the, you know, now s-somebody might feel like starting their own business and, you know, being independent is far more accessible by, engaging in voluntary trade, rather than engaging in involuntary trade of, theft, that, you know, I think that it, it, it'll reduce the amount of crime in society. the, yeah, I, I don't have, I don't think I have anything else to say, there. Okay." }, { "speaker": "pierre_rochard", "time": "01:01:56", "start": 3716.68, "text": "Well, one other area I'm curious to get your thoughts on, because it's, you know, it's quite topical now, is government adoption of Bitcoin, right? Now In libertarian circles, I guess, or, you know, depending on your view, there are some who would say, you know, think about the Murray Rothbard, \"Do you hate the state?\" sort of answer, and there would be others who see it more like, \"Well, if the state adopts Bitcoin, then maybe they'll be a little more like open to letting their citizens hold Bitcoin too.\" Now, to be clear, there will be, of course, there will be some states who hold Bitcoin and ban their citizens from holding Bitcoin, and there will be some who might argue that, you Now, while I, I guess where I'm seeing it is, while I think, you know, yeah, ideal would be ev- if everything was privatized, but in practice, what we're probably gonna see is a world of maybe smaller states, maybe some monarchies, maybe some free private cities, and, you know, we'll see lots of smaller states, and that's kind of in practice what we might end up getting, but I'm curious any reactions you have on, on the question of whether a Bitcoiner should, you know, especially in your case as an American, should a Support the state to acquire Bitcoin, or should it be seen as you should, you don't want the state to have Bitcoin?" }, { "speaker": "stephan", "time": "01:03:12", "start": 3792.55, "text": "Yeah, I, I think it's very simple, which is that does, does them acquiring Bitcoin move them more in the direction of being a state? That is that are they increasing their monopoly on the use of violence, or are they decreasing their monopoly on the use of violence, and are they becoming less of a state and more to- Towards what, you know, you described of essentially libertarian governance of, you know, private, cities, private, monarquies, whatever, you know, form that takes. And I think it's quite simple. a, a government acquiring Bitcoin moves them away from being a state in kind of the Rothbardian definition of a state and more towards being a, a private entity and an, an our- Anarcho-capitalist world, because they don't control Bitcoin. So, they aren't sovereigns over Bitcoin. And this isn't just me, the crazy anarcho-capitalist, saying this. This is Larry Fink on national television saying Bitcoin is above governments, right? it just is. And so when a government is adopting Bitcoin, they are fundamentally abdicating their monopoly on the use of violence and seeding it To the nodes, right? the, the, the nodes are the ones that, use violence, and really we're, we're talking in a very metaphorical sense here, because when they reject an invalid block That is the use of violence, right? in this context of governance. and so now it's decentralized because anybody can run a, a Bitcoin node. but, I, I don't think there's any ambiguity about whether it's good for, for governments to hold Bitcoin or not from a libertarian perspective. because of that philosophical question of, does this make them more of a state or less of a state? And we should always want them to be less of a state. And if they're abdicating the monopoly on the use of violence And seeding it to a non-state, decentralized network. This is-- it's just, it's unambiguously good. I, I, I really don't understand the, content. So let me try, let me try to" }, { "speaker": "pierre_rochard", "time": "01:05:31", "start": 3931.4, "text": "steelman it for a second here. Yeah, yeah, yeah, please do. So as I'm reading you, it's maybe-- Okay, maybe the argument would be They might become very powerful in the short to medium run, but in the long run, they are seeding monetary authority in a sense, right? So as an example, the US government has, I don't know, two hundred thousand coins or something like that, you know, something similar to the size of MicroStrategy's stash of coins, but- It could theoretically make them very, very powerful in the short to medium run, and, you know, if it's a very bloodthirsty, war-mongering state, they could, you know, use those coins for, for evil. Maybe that's the steel man." }, { "speaker": "stephan", "time": "01:06:11", "start": 3971.91, "text": "So, so I, I, I think that, essentially the, the question has to be ring fenced because is it, should a libertarian be opposed to a government using Bitcoin to, you know, inflict, to, to violate the non-aggression principle? Yeah, of course we should be opposed to that. but that is a separate question in my mind. Now, maybe there's a connection of, if they're holding Bitcoin, then they are more likely to do that. I would argue they're less likely to do that. I, and so, so to go back to, to the initial question of just holding it in, in a vacuum, right? I, I think that that is one question, and then the second set of questions is, what effect does holding Bitcoin have on their set of incentives? Because so on the first question of just holding Bitcoin, even if they continue to do everything they have been doing historically They are still implicitly, at the very least, implicitly seeding, monopoly. They, they are, they're, they're, they're giving up the" }, { "speaker": "pierre_rochard", "time": "01:07:26", "start": 4046.44, "text": "cenerage, right?" }, { "speaker": "stephan", "time": "01:07:27", "start": 4047.29, "text": "Yeah, they're, they're, they're, they are Kissing the ring, they are bowing down to Bitcoin just by holding one Bitcoin, you know, that they are doing that, and that they, they, they, they, they are bending the knee. And so- I think we, we could stop the analysis there, but if we continue the analysis, we have to look at, okay, well, now what are their incentives when they're holding Bitcoin? This is where, so I listened to George Selden on, Laura Schindler's, podcast, and his argument was that the government or the state, you know, whatever, terminology we wanna use, should not hold any amount of money beyond their immediate needs. That the government should be hand to mouth, paycheck to paycheck, right? You don't want the government ever having a reserve of money. it should be taxes in, taxes out. And I, I, I, I think that that would be a fine analysis if we're looking at it in a world where, there is no private money like Bitcoin. Yeah. Now we get into debates about what is private money. but, there is no market-created or market-adopted money like Bitcoin. You know, if we're just talking about fiat currency, then I agree it's a little bit absurd for them to- Say that they have a hundred billion dollars of fiat because they have an infinite amount of fiat. They can just" }, { "speaker": "pierre_rochard", "time": "01:09:02", "start": 4142.46, "text": "print more, yeah? It's not a big deal. Yeah, their," }, { "speaker": "stephan", "time": "01:09:04", "start": 4144.14, "text": "their fiat reserves are always infinite. So George Selgin's analysis, I think, kind of falls apart in the fiat world where you can say, \"Oh, they shouldn't have any reserve of money.\" But they have an infinite reserve of money because we're on a fiat standard, so already they are admitting the need to have a reserve. otherwise we would have some kind of fixed monetary policy, right? That there would be, no, no elasticity of, of money. The, the other piece of it is, okay, how much Bitcoin should they hold, right? And I think that this really goes, back to our personal fin-- finance question of alleviating the uncertainty about the future. I think that the future is always uncertain. I think that there's a tremendous amount of uncertainty. I think people misprice uncertainty, right? That they-- and due to fiat, and that under a Bitcoin standard, the total money held would be We, we can't wrap our minds around it as, as people who live in the fiat world today. It's astronomical the amount of Bitcoin that will be held relative to the value of goods and services and of capital goods in society. it will just eclipse it, and, the, the, the, meaning that the real purchasing power of the UTXO set will be many multiples of what's available to buy, by so many orders of magnitude that we can't wrap our minds around it, because we just don't understand the, the, the amount of uncertainty that needs to be hedged out there, because it just hasn't been hedgeable, in the past. So meaning that- If we're thinking about, okay, the more Bitcoin a state holds, the less of a state it is, right? If, if we can accept that part, I think that then that removes the libertarian morality question of should they hold Bitcoin or not, and then it also removes, are they holding too much Bitcoin or not? Because You know, it's always good to hold more Bitcoin than less. Then it's really about, is the state planning, you know, i-is it central planning, right? Of, okay, you know, they're, they're trying to figure out how much uncertainty there'll be over the next decade or century or millennia? And if, if this entity is really about like the long term, right, of, you know, we need to be thinking about the long term. So I see holding Bitcoin as the opposite of central planning, because essentially you're maintaining neutrality about what the uncertainty will be. You don't, you're not-- So central planning is, well, we're gonna build nuclear reactors because we think that's going to be the best technology, and so that's why we're, we're buying nuclear reactors. If you say, \"Well, we're gonna hold Bitcoin,\" it's not that you're saying that Bitcoin is the best savings technology. That's already established, right? and it's saying that we don't know whether nuclear reactors will be the best investment or not, and we're actually, we're gonna let the private sector figure that out. What we're saying is that when we look at the, the, the functions of the state, and I think this is where there's a serious, a libertarian argument. Maintaining the territorial monopoly is the big uncertainty, right? So how much do we need in resources to maintain the territorial monopoly? Historically The way they've done this is by maintaining a standing army instead of holding Bitcoin, such that in a crisis you could stand up an army very quickly, and, possibly even bribe the attacker into not attacking, right? Lots of negotiating. I thought, you know, I'll leave that to the statesmen, the, the people or the, the statists, operating the state. but from a libertarian perspective, It, I would argue that it's a question of, well, would you rather, it's a lesser of two evils. Do you want a standing army or do you want them to hold more Bitcoin? the other pragmatic argument would be to say, hey, look, there's no way for the state to hold Bitcoin, other than by individuals. So this is where we get into the, agency principle problem." }, { "speaker": "pierre_rochard", "time": "01:13:39", "start": 4419.23, "text": "Yeah." }, { "speaker": "stephan", "time": "01:13:40", "start": 4420.51, "text": "And I think that when you start having individuals hold Bitcoin, even if it's in a multisig, they're no longer thinking about what's best for the state, they're thinking about what's best for themselves, and you've privatized the state. through a backdoor of holding Bitcoin reserves. And so I think that it goes beyond just the state is bending the knee to Bitcoin, I think it's that, through a, you, you, you've done a, a, a, a, a management buyout of the state. where the insider is now, instead of operating a public entity, quote unquote, you know, this, this territorial monopoly, now they operate a private entity that is, a, a government, that is privately, controlled. now people point to like the deep state as being this already, that there's already actors who are already operating the state for their own benefit, and so, you know, the state- State has already been privatized, and that the problem here isn't so much a libertarian question as like a, a control question of these people are still taxing. And that's where we, we, we veer away from the question of how much Bitcoin should the state hold in reserve as the question of taxation with Bitcoin. Because taxation with Bitcoin, my view is that it, it- Becomes orders of magnitude harder to tax Bitcoin than to tax, fiat. and, you know, maybe we leave that for another episode as we get into Joe Rogan's whole rabbit hole, right? Yeah." }, { "speaker": "pierre_rochard", "time": "01:15:23", "start": 4523.52, "text": "But I mean, I guess one, I guess one other question that comes up here for me and- I, I'm, I'm sort of, I'm sort of, I'm mostly with you here, but there's one point that kind of, you know, I still do think there's gonna be risk that if, you know, a very war-mongering state has access to all this Bitcoin, that they could use it to go and do all these wars and destruction, and it's, it's gonna be cold comfort, if we said, \"Oh, hey, we were against the state doing that war.\" Well, I mean, they find ways to propagandize and get" }, { "speaker": "pierre_rochard", "time": "01:15:59", "start": 4559.54, "text": "That most of the governments around the world are in a lot of debt, so they clearly have an issue, being profitable, right? They, they just spend more than they earn in sim- in very simple terms. And so even if a state has Bitcoin, it's unlikely that they will hold it for very long if they are very, spending and they don't-- if they spend like drunken sailors, right? And so I think that's, that's also an interesting point if you, if we think about the state of government debt around the world, especially in the US government where I think the last stat I saw was like, is it like three billion a day is being paid in interest or something ridiculous, and so it's really quickly running away, and so even with two hundred thousand Bitcoin, you know, they may not be able to make that difference up." }, { "speaker": "stephan", "time": "01:16:44", "start": 4604.12, "text": "Yeah, and I think that's part of what changes their behavior is that they realize the scarcity element, that if they spend all these Bitcoin on a war, they don't have any left. and, they would have to find a way to either seize more Bitcoin, which, by the way, like, it's not trivial, right? they've kind of gotten lucky, and I'd say it's gonna get harder and harder as, people learn to better secure their Bitcoin. Now, obviously, I don't want criminals to secure their Bitcoin. Bitcoin very well. I, I wish criminals, would, you know, lose their keys in a real boating accident." }, { "speaker": "stephan", "time": "01:17:21", "start": 4641.97, "text": "but short of that, I mean, I, I don't have a problem of, you know, if somebody is, a murderer and the state seizes their Bitcoin, that seems like in the same vein of the state arresting them, you know, is a libertarian opposed to that? Generally not. that's, it's fine for the state to arrest an actual murderer. So, yeah, they, they'd still have to get the Bitcoin they could tax, right? but, I think the, the bigger question though is, isn't even so much kind of these, Teal, consequentialist, like, far out. Okay, if this happens, then what? It's a much more immediate question of, does this accelerate Bitcoin adoption today? And to have Donald Trump on stage saying the US government should hold Bitcoin And that we should never sell Bitcoin. That influences millions of Americans into thinking, \"Well, if he thinks it's good for the state, maybe it's good for me.\" And so that level of influence, I think that, that's, that, that is the much more pragmatic question of, is it good to advocate for, a, strategic reserve? well, yes, because then it raises the question of whether you should buy and hold Bitcoin from a personal finance question to a public political question, which then leads to lots more conversations that will ultimately lead to more Bitcoiners. So I think that, that's kind of the, the, the biggest argument in favor of us being involved in politics and advocating for this." }, { "speaker": "pierre_rochard", "time": "01:19:09", "start": 4749.33, "text": "And I, you know, I agree with you there. I think you're right. I think, ultimately getting more people to adopt Bitcoin as their, you know, as their money, as their savings technology, it's a good thing for the world. So we should do that. We should advocate for that. I think it's a great spot to finish the episode. as always, really enjoyed chatting with you, Pierre. Listeners, find Pierre There is the VP of research at Riot, and of course, we'll link to, your tweet as well with the, the research you did." }, { "speaker": "stephan", "time": "01:19:39", "start": 4779.93, "text": "Yeah, I also wanna show, the, Blocktime podcast, produced by Riot. Oh yeah, great, we'll put" }, { "speaker": "pierre_rochard", "time": "01:19:44", "start": 4784.49, "text": "that, yeah." }, { "speaker": "stephan", "time": "01:19:46", "start": 4786.27, "text": "we, we do deep dives into a lot of topics that might be of interest to, to your listeners. the latest one is about The Economist ran an article, full of false information, so, we, we do a deep dive into that using How the Economist is wrong, so I hope your listeners will tune into that." }, { "speaker": "pierre_rochard", "time": "01:20:05", "start": 4805.71, "text": "Yeah, fantastic. I'll, I'll find that and I'll put that in the show notes. Pierre, thank you for joining me today." }, { "speaker": "stephan", "time": "01:20:10", "start": 4810.71, "text": "Thanks for having me on, Stefan." } ] }